Shared Warehousing vs. Dedicated Warehousing

What Makes Shared Warehousing A Great Idea Over Dedicated Warehousing?

A large number of business owners need warehousing facility to keep the products after manufacturing, raw material for production, to store byproducts, to keep within the distribution channel, etc.

The condition is same across the businesses from small businesses to large business, and everyone needs warehouse space to keep their business products, byproducts, etc. Considering the demand, warehousing itself has grown as a multi-million dollar business now, and it is increasing year after year.

The warehousing firms provide two types of warehousing services depending upon the operation and control; that are dedicated warehousing and shared warehousing.

Dedicated Warehousing

It means that a business is taking some specified warehouse for rent to use for its business purposes. The renting would be for a specific period, and the business has to pay the rent amount every month irrespective of its business activities or effective use of the space.

Some businesses build their own warehouses instead of renting from someone. Whatever could be, the business has complete control over the facility, and operating costs and utility charges should be borne by the business.

Shared Warehousing

In shared warehousing either a third party runs the warehouse, and businesses use the space for their needs and pay according to their use, or a number of businesses start a warehousing facility and share its expenses according to the usage.

When it comes to small businesses, businesses that don’t need too much warehouse space, and season businesses can find this option great. It also ensures greater flexibility for its users in terms of maintenance and responsibility.

What Makes Shared Warehousing a Better Option?

A number of factors making shared warehousing a better option over dedicated warehousing. Its primary benefit is that people who use shared warehousing only pay for what they use. In simple terms, according to space and how long it is used, the business has to pay the charges.

This means that people do not want to pay for the unused period. In dedicated warehousing, the user has to pay the total expenses, though he did not use it during the period or only partially used. It should be noted that there are many other expenses apart from the rent of the facility.

It includes equipment, technology, labor, specialized skills, etc. and the user has to bear all the expenses associated with the warehouse.

Dedicated warehouses also give operational challenges for the businesses to efficiently run it, whereas shared warehouses do not have any such issues considering they follow the policy of pay and use.

The businesses do not want to run behind the regulatory requirements, necessary approvals, and documentation for the warehouses in case of shared warehouses.

An unprecedented requirement on warehousing space can be easily addressed in the case of shared warehousing. When it comes to dedicated warehousing, if the inventory or its products go beyond the capacity of the warehouse, it has to invest the additional amount to either construct or to take additional space for rent.

Sometimes, they would be forced to follow shared warehousing option at the end, to meet the capacity. It is also found that most of the dedicated warehouses are not effectively utilized and this creates the issue of inefficient warehousing.